Time to Cut the Billions in Improper Payments

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

November 16, 2016 - 13:49 — Rachel Cole

When the average American sees an incorrect charge on his or her credit card statement, a quick to call the bank ensues to ensure that the money is promptly returned. Unfortunately, the federal government is not as efficient. Since 2010, federal government improper payments have totaled nearly $600 billion, mostly (90 percent) in overpayments.

In 2010, Congress passed the Improper Payments Elimination and Recovery Act (IPERA), which was the third law enacted since 2001 to address this problem, in order to more effectively identify improper payments (payments defined as “should not have been made or made in an incorrect amount”) and to identify problematic programs faster. On October 20, 2016, the House Committee on Oversight and Government Reform released a report analyzing the data on improper payments since IPERA was first passed.

Before agencies were required following the 2001 bill passed by Congress to report their total improper payments, federal agencies estimated their improper payments to be $20 billion in fiscal year (FY) 2001 and $45 billion in FY 2004. Improper payments have totaled nearly $600 billion since IPERA was passed, with FY 2015 being a record-setting year with $137 billion in improper payments. While it would appear that improper payments as a whole are on the rise, the report claimed that this exponentially increasing number is a sign of IPERA working: “When agencies and IGs [Inspector Generals] take their obligations seriously, agencies produce good faith estimates that allow problems and errors to be identified." Prior to IPERA, federal agencies did not have to use statistically valid estimates, nor report to Congress on those findings with solutions.

In FY 2015, 75 percent of improper payments came from three agencies: the Department of Health and Human Services (HHS), the Social Security Administration (SSA), and the Department of Veterans Affairs (VA). HHS alone reported more the $363 billion in improper payment since IPERA was passed in 2010, equal to more than 60 percent of the total.

The committee report made six recommendations: agencies need to do more to ensure the accuracy of their data, according to many of their IGs; agencies need to act on the recommendations made by their IGs; the nine agencies that do not comply with IPERA need to meet their legal obligations under the law; 11 agencies need to establish and work toward improper payment reduction goals; the Do Not Pay Businesses Center (DNP) at the Department of the Treasury, which catches improper payments before they are disbursed, must be expanded; and the Office of Management and Budget must improve its government-wide reporting on improper payments.

Agencies are more effectively tracking their improper payments than ever before. They must take steps to not only stop the improper payments from happening, but also increase their focus on the recovery of the payments they know to be improper. For example, HHS has the highest rate of improper payments, but it has effectively gutted its most effective payment recovery program, recovery audit contractors (RACs). RACs returned billions to the Medicare Trust Fund at no cost to the taxpayers, but this program has been effectively eliminated by HHS and members of Congress.

Federal agencies need to be doing more to save the taxpayers’ dollars, before and after payments leave Washington.